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    Efective annual rate

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    This is a multiple choice question.

    Suppose you pay 15% as a nominal annual rate on your credit card. If you make monthly payments with monthly compounding, what is your effective annual rate?

    A. 1.25%
    B. 15.00%
    C. 16.08%
    D. 18.80%
    E. 19.24%

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    Solution Summary

    The solution explains how to calculate the effective annual rate